Certified Government Financial Manager (CGFM) Practice Exam 2025 - Free CGFM Practice Questions and Study Guide

Interperiod equity is a fundamental concept in public financial management that emphasizes fairness in the distribution of costs and benefits across different periods, particularly between current and future taxpayers. The principle asserts that governmental entities should not impose the financial burdens of current expenditures on future generations.

By ensuring that the current generation pays for the services it consumes, interperiod equity maintains a sense of fairness and sustainability in public finance. This is particularly important in the context of long-term obligations such as debt and pensions, where the benefits gained today should be equitably matched by the costs incurred.

The other options do not align with the principle of interperiod equity. For instance, the idea that future generations should bear current costs contradicts the fundamental goal of the concept, which is to avoid passing on financial burdens. Allowing current year services to be funded by future revenues or permitting borrowing for operational purposes can lead to the very shifting of costs to future taxpayers that interperiod equity seeks to prevent. Therefore, the correct understanding of interperiod equity directly supports the notion that the current generation truly ought to bear the costs associated with its fiscal policies and services.